Housing finance companies shares hit new high in weak market

Shares of housing finance companies (HFCs) were trading higher by up to 4%, extending its past week rally, after the Reserve Bank of India (RBI) lowered risk-weights assigned to home loans lent on or after June 7.

LIC Housing Finance, PNB Housing Finance, Gruh Finance, GIC Housing Finance and Can Fin Homes hit their respective record highs on BSE in intra-day trade on Monday. At 12:34 pm as compared to S&P BSE Sensex, which was down 0.46% or 143 points at 31,119.

Since June 7 RBI policy, HFCs has outperformed the market by gaining up to 18% against 0.5% decline in the benchmark index.

The RBI has reduced the risk weightage on home loans above Rs 75 lakhs to 50% from earlier 75% and in addition to this, the standard asset provisioning on home loans has been reduced to 25 bps from 40 bps.

“We had been positive on the housing finance space in India and the current measure of lower risk weightage and lower provisioning requirement should bring in higher growth for the sector in the quarters to come,” Angel Broking said in a client note.

The Union Budget for 2017-18 sharpened its focus on expansion of the affordable housing sector to address the supply side and affordability related issues. According to ICRA, the allocation under the Pradhan Mantri Awas Yojana (PMAY) for 2017-18 was increased by 39% to Rs 29,000 crore.